Preliminary Expenses

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CS Akansha Gambhir (Querist)
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26 July 2010 A company purchased some assets and incurred some expenses before its incorporation.

(i) Can the Company legally do so?

(ii) What will be the treatment of these items in the Balance Sheet?

(iii) From what date will the Company charge Depreciation on such assets?

mohinder kansal

mohinder kansal (Expert)
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26 July 2010 Company can incur expenditure before incorporation which are called preliminary expenditure and can go for purchase of fixed assets on behalf of company under incorporation.

fixed assets shall be shown under the head assets under installation depending upon the nature of assets. expenditure under the preliminary expenses on assets side.

depreciation shall be charged from the data when the assets shall be put to use for the purpose of the business or if industrial unit when the unit will commence commercial production

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